How Private Equity Uses Debt to Win Deals

In this conversation, Tim shares his unique journey to Permanent Equity, detailing how a chance phone call led him to a career in private equity. He explains the innovative approach of Permanent Equity, which focuses on acquiring small businesses without leveraging debt, allowing for long-term growth and stability. Tim discusses the transition from public to private markets, highlighting the challenges and opportunities in each. He emphasizes the importance of assessing quality of earnings through cash flow analysis and shares insights into investment strategies, team culture, and the role of storytelling in building a successful business. Throughout the conversation, Tim's philosophy of optimizing for fun and meaningful work shines through, making for an engaging and insightful discussion.

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Chapters

00:00 The Journey to Permanent Equity

05:06 Understanding Permanent Equity's Unique Approach

08:22 Transitioning from Public to Private Markets

12:40 Investing Strategies: Public vs. Private Markets

15:08 Why Columbia, Missouri?

18:24 The Concept of Beer Money

21:04 Quality of Earnings in Small Businesses

24:24 Debt Levels in Private Equity

29:49 Assessing Performance in Private Equity

31:40 Understanding Fees and Returns in Private Equity

34:49 Strategic Distribution Decisions

37:13 Case Study: The Airplane Parts Business

41:43 Risk Management and Investment Philosophy

43:09 First Year Post-Acquisition Strategies

47:53 The Importance of Storytelling in Business

52:17 Optimizing for Fun and Asymmetry

55:43 Attracting Talent to Missouri

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